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My credit score isn't terrible - 715ish and my total utilization across 2 cards (one is my own card, and I'm an authorized user with a balance transfer on one of my gf's cards for the other) is around 20%. I also have a personal loan with a low balance. My credit history length and mix of accounts (mortgage, credit cards, car loa, etc) are both good.

I hit a few bumps in the road about 2 years ago that included a good sized charge-off (after several missed payments) and closing of a long-time credit card account. I've paid the charge-off (at around 50%), but I think it's this, and not my credit score itself or account history, that is keeping me from getting any additional credit for "normal" people - I'v been denied for an additional personal loan and as well as a credit card from my bank... both about 6-9 months ago.

I want to strengthen my credit so that I can apply for another mortgage in a year or 2 and am trying to figure out what kind of card for people with "bad credit" to apply for. I've been looking at sites like Nerd Wallet that list some cards that recommend a score of 450-650. And then there's a vast selection of secured cards.

I'd like to think that I didn't screw myself with the charge-off SO much as to need a secured card, but I also don't want to take another hard inquiry and be denied again.

Does anyone have any insight into the approval process have any recommendations for which type of card to apply for? Or do I need to give it a bit more time to have that charge-off not weigh so heavily?

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  • I doubt a credit score as "low" as 715 was the deciding, or even most important, factor in any rejection. Looking at creditkarma.com/advice/i/credit-score-ranges, the worst description of 715 would be in the middle of the "good" range. – chepner May 27 at 15:13
  • @chepner - yeah I meant that the charge-off and subsequent closing of accounts (along with previous missed payments) is the reason for the denial. OP edited to be more clear. – Daveh0 May 27 at 17:36
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What has seen my credit go past 800 is the following:

  • Settle all charge offs, you can typically do this for less than the amount owed. Around 25% of balance seems to be acceptable to most but you may want to try for lower given your long time horizon. Never give them access to your checking account, pay the full amount in a lump sum, and get it in writing that the agreed upon amount settles the bill.
  • Have one or two open credit card accounts. One should be near zero utilization. I have my every day card, and another that is used when its special perks are needed.
  • Pay in full all other loans. There is no need to get more loans.
  • In your case, save money like crazy. Having a full down payment (20%) will drastically help with your rate.

Credit score algorithms are dynamic and can change often. Gaming the system is increasingly difficult. Just pay your bills.

It also seems to me, that the age of accounts, mean less than they used to. A 2 year old account seems to contribute just as much to one's credit score as a 18 year old account if they are utilized correctly. That is, if this is a credit card, the balance is pain in full each and every month.

Hopefully that goes without saying: Pay off your credit card each month, or don't use them.

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    If "balance is pain" every month you're spending too much :-) – TripeHound May 27 at 13:06
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Your score of 715 is typical - the average for Americans is 719, so you aren't out of the ballpark. It's possible to obtain a mortgage with a score as low as 580, although that will obviously be a subprime loan that carries a higher rate.

For starters, to improve your credit you need to settle any outstanding collections. Yes, you CAN settle them for less than face value, but the positive effect on your score when you do a partial settlement is less than it would be if you were to pay it in full. The collection agencies include that with their reporting info to the bureaus.

Opening additional cards now is a negative for you, because it lowers the average age of accounts, and that has an effect on your ability to borrow. The more sensible thing would be to see if you can increase the limits on the cards you already have. This lowers your credit utilization rate and your average age of accounts doesn't take an unnecessary hit.

While it won't have any effect two years from now, all of your card applications impact your score for anywhere from six months to two years if the creditors did a "hard" pull. You'd know this if the bank/creditor told you the application wouldn't affect your score, in which case it was a "soft" pull that doesn't hurt you.

If you don't need the credit, stop applying for it.
If the goal is to improve your credit enough to buy a house, focus on what you already have. If you feel the need to add more and don't want to risk denials or adding more inquiries then go to a credit union and ask about taking out a secured installment loan. Credit unions are great for this because they charge very low rates for them. Mine charged me 2.4% for a secured loan.

In the end, you really need to pay the charge-off if you plan to buy a house, because if it is still active then it could affect your ability to obtain a mortgage at a decent rate. Figure out a way to make arrangements and then keep them.

Those are the best suggestions I have for rebuilding your credit. Good luck!

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  • interesting... so you feel account age does have that much of an impact in the decision-making process? I'm not disagreeing... just not 100% aligned with @Pete B's statement above. – Daveh0 May 27 at 17:42
  • SRiverNet raises the interesting claim that repaying 100% of the chargeoff, years later, could drastically improve your credit. I would like to hear more details about what the credit bureaus would notate, and if a credit expert would agree. If you pay back the chargeoff in full, it my mind it would be "paid in full, years late" - is that a real category? How negative is that category vs. the current category (chargeoff) that you are in? – Orange Coast- reinstate Monica May 27 at 17:57
  • I never said it would "drastically improve credit", I said "positive effect on your score when you do a partial settlement is less than it would be if you were to pay it in full". You can see it when you look at your report with sites like Credit Karma. The bureau files report that a collection debt was settled for less than face value, and while the exact number is unknown, there is definitely a difference in how that is scored versus full repayment of a collection balance. I don't mind debating issues, so long as I am correctly attributed as to what I say. – RiverNet May 27 at 18:15
  • @Dave0, if you look at any explanations of the credit scoring models, they ALL show that account age counts for as much as 15% of your score, and the "younger" the average age, the less positive effect it has. If you read any of the articles out there on building credit, they all advise not to close your oldest accounts for that very reason. Say, for instance, I have a single card I've had for 10 years and 2 more I received this year. My average age of accounts would be about 3 years. Closing that one old card would reduce it to less than a year. That definitely impacts the scoring model. – RiverNet May 27 at 18:18
  • @Dave0, "The length of your credit history, or how long you’ve been using credit, typically accounts for 15 percent of your total credit score. While it isn’t the most important factor used to calculate your FICO® score, the length of your credit history does matter. Generally, the longer your credit history, the better it is for your credit score." - cited from Lexington Law at lexingtonlaw.com/credit/length-of-credit-history. – RiverNet May 27 at 18:20

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